Want to invest like Buffett and Soros? Try this

The easiest way to “invest like a billionaire” would be to start with a billion dollars.

Since you don’t have that, your latest way to invest like the super-rich involves a new exchange-traded fund with an appealing methodology.

The question is whether it’s a gimmick or if it actually works.

The Direxion iBillionaire Index ETF
IBLN, -0.13%
debuted Friday, tracking an index made of 30 large-cap stocks that — when viewed through the lens of filings made with the Securities and Exchange Commission — appear to be the favorites of guys like Warren Buffett, Carl Icahn, David Einhorn and George Soros.

You could make a case that having rich successful guys “select” stocks — even if the iBillionaire index is a reflection of their public trading activity rather than any actual purchase recommendation — is a better idea than having three guys (one of them a newspaper editor) picking the stocks that make up the Dow Jones Industrial Average
DJIA, -0.32%
. In fact, iBillionaire president Raul Moreno makes just that case.

If you buy that argument, then you might believe that the folks at Direxion have found the proverbial “better mousetrap,” and that money will flock to the iBillionaire fund.

Red wine for a summer's night

(2:20)

Red wine for a summer’s night? It’s not as much of a stretch as it may seem.

A few years back, however, Andrew Hargadon, an entrepreneurship expert who teaches at the University of California-Davis, noted that the U.S. patent and trademark office had issued over 4,400 new mousetrap patents since it opened in 1828, but that only two dozen of those ideas “have made any money, and only two designs have ever dominated the market.”

In short, even if you have designed a better mousetrap, the world may not agree and rush to your door.

And in the case of the iBillionaire ETF, there’s a good chance that investors will come away feeling like this is more marketing ploy than something to buy.

Moreno, however, disagrees. In an interview that will air next week on MoneyLife with Chuck Jaffe, Moreno notes that investors are already trying to follow investment geniuses, but that “this makes it much easier to do,” and it doesn’t force the investor to rely on any one particular expert.

The fund equal-weights the stocks, meaning each of the 30 holdings accounts for 3.33% of the overall portfolio. That means it’s making high-conviction bets not only on Micron Technology
MU, -6.98%
— which amounts to 0.17% of the Standard & Poor’s 500
SPX, -0.23%
— but on big names like Apple Inc.
AAPL, -0.87%
, which represents 3.14% of the S&P.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.